Presently, California is a failing state government that is about to ask for a bailout from Washington. State voters rejected Republican Gov. Arnold Schwarzenegger’s proposed measures (to stem the growing financial difficulty) that include higher taxes, budget cuts, and borrowing from lottery revenues.

California is said to have enough cash resources to stay afloat till June 30 of this year, but state financial authorities assert that it will need additional $10.6 billion to survive just the summer.

California’s Legislative Analyst’s Office is of another, albeit more radical, view should the new measures not be passed: “Failure of measures in the May 19 special election would increase the state’s cash flow pressures substantially – potentially increasing the short-term borrowing requirement to well over $20 billion. California is likely to have difficulty borrowing anywhere close to the needed amounts from the short-term bond markets based on the state government’s own credit.”

The only option left is capital markets, but the state has a very poor credit rating. It was pronounced in February by Standard & Poor’s Corp. as the state with the worst credit rating. California also has a budget deficit that is projected to reach $21.3 billion.

So, the only expedient thing left to do is to apply for government bailout much like the US banks did. However, if the US Treasury Department gives in to California’s request, there’s no stopping the 47 other states that are likewise said to be currently ‘suffering declining revenues’ to apply for the same federal rescue.

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Via CBS News